Abu Dhabi – Mubasher: Fitch Ratings said on Tuesday that fiscal policy responses by Gulf Cooperation Council sovereigns to lower oil prices are likely to be small compared to the loss of revenues over 2015 and 2016.

The size of the fiscal challenge from cheaper oil varies from country to country, broadly in line with hydrocarbon production per capita, according to the ratings agency.

“Some policy responses deployed by other oil exporting-sovereigns are harder to enact, or carry greater risks, for GCC sovereigns. For example, we do not expect any change to exchange rate pegs in the region to ease fiscal adjustments. Pegs are key nominal anchors against inflation, are backed by huge reserves and receive strong political commitment, and the private sector has no experience of exchange rate volatility,” said Fitch.

Fitch also forecasts Kuwait to run a budget surplus in both years even with its revised average oil price (Brent) forecast of USD55/b for 2015 and USD60/b for 2016, and Qatar a small (0.6% of GDP) deficit in 2015, although this rises to 5.3% next year.
It also expects Bahrain, Oman and Saudi Arabia to record double-digit deficits in 2015, although all three will benefit from some narrowing next year.